Jul 12, 2012, 08.23 AM | Source: CNBC-TV18
In an interview with CNBC-TV18, Willie Williams, director at Societe Generale, spoke about his reading of the euro-dollar and the road ahead for the currency.
Below is an edited transcript of the interview. Also watch the attached video.
Q: How sustainable is this strength in the euro?
A: The strength in the euro is only sustainable in the short-term. The markets have started to discount a lot of very negative news. So, today we were surprised by the outcome by the summit in Europe with both the mechanisms to support Spain as they will and to help the rest of the continent. But then we were also hit with negative data coming out of the US. The market is extremely short euro.
We a technical bounce today, but the risk is that risk assets will continue to rally.
Q: Give me a timeframe of where you and how you expect the euro to move let’s say over the course of the next few weeks or so because I know many economists we have spoken to on the show have pointed out all the negative news that we should be prepared for. For instance, a disappointment if the ECB does not cut rates or the Greece re-negotiations. That’s the bailout re-negotiations that begin next week at some point or further nervousness regarding Spanish banks. So what's your near-term outlook on the euro?
A: My near-term outlook on the euro is: I do not think we are going to break 1.30. I feel that the euro has benefited from the surprise of what came out of the summit. I am concerned about some of the data coming out of the US though, the numbers today were quite disappointing and that would give us that extra leg up 1.26 to 1.27 on the euro.
Q: Not very long ago really people were calling for the 1.20 level on the euro. I know there have been conversations all through last year about the euro and the dollar reaching parity level. Where do you see the floor?
A: I feel that until we see significant outflows from Europe — previously, we saw portfolio flows from Southern Europe to Northern Europe — but until we see people totally giving up on Europe as a whole, which the recent events over the course of the last 24 hours makes it looks like they will not have to give up on the euro, any move down on the Euro would not be a very slow move.